January 9, 2007: Our Investor Newsletter is designed to help keep our stockholders informed on the kinds of things we’re currently working on, and how these things might interact with Northamerican Energy’s short, and long, term goals, and plans, for the future.
Specific public announcements and news releases will continue to be posted as newsworthy events occur, but in the time periods between those releases our Investor Newsletter will fill in the gaps and continue to keep you, our investors, informed.
Existing Leases And Wells: The workovers of our existing leases, and their wells, are ongoing and a considerable increase in monthly production has been noted so far, but with the next phase plans we have in place it is anticipated that we will double, or triple, our current production upon completion. These plans include completing the downhole treatments on the two wells previously completed with Well Enhancement Service's Radial Jet Drilling technology and perhaps utilizing it on some additional wells. Equipment and labor is still in short supply, and continues to constrict our ability to get things done in a timely manner.
Acquisition of New Leases & Wells: On November 8th we announced that we reached an understanding to acquire and assume as many as 6 additional leases in the Permian Basin, which has now grown to 17 all of which we are completing our review, and due dilligence on, and a portion of of those lease will be executed shortly with the mineral rights holders and the State of Texas shortly.
These properties contain a number of inactive gas and oil wells in shallow (1500'-4300') oil and gas fields located on non-contiguous acreage and leases in Pecos County, Texas. These properties are in a mature, existing field, and these leases were developed and operated until they became inactive in the past 10-15 years when oil and gas prices did not support their continuing operation.
These leases and their wells are low-cost, low-risk, primary production properties in need of work over using numerous types workover procedures and will return investment and workover costs quickly resulting in positive cash flow for the company within 12 months after completion.
Other Items of Interest: As I have shared with you previously it was, and still is, our intention to register our 15c2-11 with NASD which makes Northamerican Energy a company where potential shareholders can be solicited, by NASD brokers, versus our current status where they cannot.
Reverse Stock Split: During the past few months we have been meeting with our financial and market advisors, and after careful consideration of all the positive, and negative, factors associated with this undertaking on January 9th, 2007 Northamerican Energy formerly announced a 1 for 20 reverse split of the Companies outstanding common stock, which resulted in 3,631,917 outstanding shares instead of the previous 72,638,335.
We knew in advance of making this announcement that reverse splits have a negative stigma. A lot of investors don't have confidence in a company that gets its stock up through a reverse split and think the company is playing games.....and yes, as evidenced by the postings on Investors Hub, and the phone calls I received after this was announced, we were greeted with the same kind of negative responses from our investors.
But that being said we effected this course of action because we firmly believe that it was in the best interests of Northamerican Energy, and in the best interests of all of our stockholders.
Some of our major reasons for proceeding down this path include the fact that we felt the share consolidation would raise the profile of Northamerican among institutional, international, and other large investors, something that is impossible to develop as a cheap penny stock.
Next, our Directors felt that we could easily achieve a more favorable stock trading range by reversing the stock. Statistics prove that the adjusted trading volume increases considerably after reverse splits, and partially suggests that the reverse stock split improve the liquidity of the stock.
In our case, any of you who have followed our trading realize that despite our best efforts to raise Northamerican’s share price under the former share structure we were unsuccessful in doing so due to that fact that there were many, many millions of shares of "cheap stock" being held by investors that would consistantly sell into the market each, and every, time the opportunity struck, resulting in Northamerican’s price per share being squelched each time the share price started to rise.
The second problem we faced concerned our desire to make additional acquisitions with stock, or stock and cash, and these efforts were being hindered by our share price, and even if we were successful in those efforts the amount of stock needed to complete these transactions would have put many, many more millions of shares in the float, something we were trying to avoid.
Now it is done....Will there be further dilution from the current 3.6M shares today? ...Yes, and that is unavoidable because in order to raise the kinds of capital Northamerican needs to grow we need to either get it from current cash flow, something we are not yet able to do, sell stock, or incur debt, and selling stock is much more preferable than incurring debt.
We have had lots of exciting opportunities presented to us, all of which take capital to accomplish, but please know that we will always endeavor to keep the float as low as possible, and in line with our revenue and book value.
In closing we again hope that these Investor Newsletter’s will help you to keep you current on what’s happening to our company and aid you in better understanding what we’re attempting to accomplish.
God bless all of you,
Chairman & CEO